SA post office in search of equity injection for modernisation

JOHANNESBURG - The SA post Office’s (Sapo) is looking for substantial equity injection and will in the future look to return to the capital markets to secure long-term funding that will be in sync with its turnaround strategy.

This is after the company last week reported an operating loss of R807 million in the year ended March, down from the R973m reported in the corresponding period.

The group also reported a loss before tax of R959m in the period, a decrease from the R1.1billion reported in the comparative period.

Mark Barnes, the chief executive of Sapo, said on Friday that the national postal services company’s long standing creditors were finally settled, but that liquidity concerns remained due to declines in revenue.

“Subsidy funding of the developmental mandates and diversifying revenue streams in commercial growth areas such as banking and e-commerce will be required to ensure the sustainability of Sapo.”

“Sapo will also require an appropriate capital structure to see it through the turnaround strategy. Ideally, a substantial equity injection will be required to replace debt funding,” Barnes said.

The results marked a significant improvement in the national postal services company fortunes after years of under performance and shedding thousands of Jobs.

Last year, Barnes, who had taken the reins at Sapo at the beginning of 2016, told legislators that the parastatal had had the term of its R2.7bn guarantees extended by the Treasury, but still needed more money to settle outstanding debt of R884m. At that time, he admitted that Sapo was chalking up monthly losses of R125m.

Last year, the Auditor General’s (AG’s) report into the financial performance at Sapo showed regression in key areas related to management, financial controls, taxation and goal attainment. The report found that the Post Office posted losses of R227m in 2013, climbing to R407m in 2014, before jumping to R1.5bn in 2015.

The AG also flagged irregular expenditure of R576.8m and fruitless and wasteful expenditure of R95m in 2015 owing to a lack of adequate financial controls at the company.

Barnes, who has previously said that the company would return to profitability in 2018, cautioned that the group still faced many operational challenges and that it needed to invest more to modernise its mail business.

“Sapo cannot compete as an insulated government department and there can be no doubt that public-private partnerships should play an important role in the future.”

Besides the appointment of Barnes last year, the group has also appointed a chief financial officer, chief operating officer and company secretary in the past seven months.

The company has set its sights on taking over the payment of social grants to more than 10 million South Africa’s next year.